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Resale Price Maintenance and Interlocking Relationships

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  • Patrick REY

    (Crest)

  • Thibaud VERGE

    (Crest)

Abstract

An often expressed idea to motivate the per se illegality of RPM is that it can limit interbrandas well as intrabrand competition. This paper analyzes this argument in a context where manufacturersand retailers enter into "interlocking relationships", that is, when rival manufacturersdistribute their products through the same competing retailers. It is shown that, even as part ofpurely bilateral vertical contracts, RPM indeed limits the exercise of both inter- and intra-brandcompetition and can generate industry-wide monopoly pricing. The final impact on prices dependson the extent of potential competition at either level as well as on the manufacturers’ andretailers’ influence in determining the terms of the contracts. Our analysis sheds a new light onongoing legal developments and is supported by recent empirical studies.

Suggested Citation

  • Patrick REY & Thibaud VERGE, 2009. "Resale Price Maintenance and Interlocking Relationships," Working Papers 2009-11, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2009-11
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    References listed on IDEAS

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